State Hospitality Industry Under Threat of Major Alcohol Tax Hike as Small Businesses Continue Struggle to Recover

January 25, 2011

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WASHINGTON, DC – The Distilled Spirits Council of the United States (DISCUS) today blasted legislation that would increase the tax burden on alcohol by 569 to 1168 percent – an outrageous proposal at any time but particularly as small businesses are trying to regain footing during a difficult economy.

“This latest alcohol tax bill shows just how out of touch the anti-alcohol activists have become in Maryland,” said DISCUS VP Jay Hibbard. “As the very businesses that the state leans on to pull its economy out of the recession are just regaining their footing, now is the worst time to hit them with any tax – much less a 570% spirits tax hike. Forcing thousands of waiters, waitresses, bartenders and busboys into the unemployment line is no way to prop up the state’s healthcare system.”

Under the proposed tax hike, Hibbard said, the distilled spirits excise tax would skyrocket to $10.03 per gallon, more than double the national average. According to a recent economic analysis, the proposed rates represent a nearly 570% increase over current taxation levels and would cause distilled spirits prices to rise by approximately 20%. If enacted, the new excise tax rates would cause Maryland retailers to lose an estimated $270 million and could put approximately 4,700 hospitality workers in the unemployment line during one of the most difficult economies in American history.

Hibbard noted that the state excise tax is merely one of multiple taxes Maryland consumers and small businesses are faced with when buying a bottle of spirits. For instance, since the last Maryland excise tax was increased, the federal excise tax on alcohol has been increased a number of times, the state sales tax on spirits has increased and local liquor taxes and fees have increased – particularly in Annapolis where officials raised the liquor fee on restaurants, bars, liquor stores and hotels 54% in 2009 following a 30% fee increase in 2008. Baltimore City also imposed a bottle fee in 2010.

“Fortunately, key legislative leaders, as well as Governor O’Malley, have rejected the notion of further raising the state excise tax on alcohol, citing the harm it would have on the recovery of the hospitality industry,” Hibbard said. “We trust they will keep their commitment to Maryland small businesses and consumers.”

Further, Hibbard pointed out, the numbers being used by pro-tax advocates to support their cause was not conducted by an independent, unbiased researcher but rather by David Jernigan – a well-known alcohol industry critic whose previous advocacy research has been cited as “flawed” by the Federal Trade Commission and others in academia. “To call this distilled spirits tax increase simply a dime-a-drink is absurd,” Hibbard said. “Any economist will tell you it translates to dollars per bottle – an increase that severely punishes businesses that purchase alcohol in cases.”

Hibbard concluded that Maryland already has the fourth largest tax burden in the country according to the Tax Foundation. Further jacking up the burden with an ill-advised alcohol tax hike would raise prices for Maryland consumers, reduce retail sales revenue by hundreds of millions of dollars and put thousands of hospitality jobs at risk, he said.